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Firms eye homeland defense dollars

The Homeland Security Department doesn’t even have an address but that hasn’t stopped companies large and small from beginning to figure out ways to cut themselves in for a piece of the $37 billion Congress has approved to fund the new agency.
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The newly minted Homeland Security Department doesn’t even have a logo, let alone an address, but that hasn’t stopped companies large and small from beginning to figure out ways to cut themselves in for a piece of the $37 billion pie Congress has approved to fund the new agency.

BOEING, MOTOROLA, IBM, Microsoft — the list of companies already lining up for a chance to grab those homeland-security contracts reads like a cheat sheet of corporate-welfare recipients. (MSNBC is a Microsoft-NBC joint venture.)

But among the sturm and drang of high-powered, well-heeled corporate lobbyists dripping with dinner invitations to exclusive Washington restaurants and tickets to Caribbean policy junkets, there are a host of smaller, nimbler companies nipping at those big companies’ heels. And some are so small they are barely on Wall Street’s radar screen, let along Washington’s.

One such company is Isonics, a Golden, Colorado-based firm whose stock sells for less than a dollar. Isonics makes specialty chemical products used in semiconductor manufacturing and in the health-care industry. Last month, the company created a division to market explosive- and biological-weapon detection products and specifically targeting the anticipated flood of homeland defense money.

Some of these smaller companies have been poised to cash in on increased security measures since 9-11. While some security firms, such as those dealing with airport security, have already benefited, for others waiting for the federal dollar pipeline to open has been tough.

“It’s been a very frustrating year,” said Marty Roenigk, chief executive of CompuDyne Corp., whose Attack Protection unit outfits federal and commercial buildings with blast-resistant windows and doors.

And even though Congress has passed the legislation to create the new Homeland Defense Department and approved $37 billion in funding, analysts caution that it may be months or years before that money begins to show up on the bottom lines of corporate America.


The homeland-security market is poised to grow by 20 percent over the next five years, according to a recent study by the Government Electronics and Information Technology Association.

“Assuming no other major incidents, it is anticipated that the addressable market will grow to $12 billion 2008,” stated Dennis McCallam, Chair of the GEIA Homeland Security study. “But more importantly, the opportunities available within the next year exceed $1 billion while the opportunities in the next two years amount to over $3 billion.”

Lost in the noise of the last-minute scramble to pass the Homeland Security bill was a provision specifically aimed at making it easier for smaller companies to carve out some of those big contracts for themselves, says the American Electronics Association.

The provision sets up a new government procurement policy specifically targeting small and minority-owned technology businesses, AEA said.

“This provision is an essential element of good acquisition planning,” said Angela Styles, Administrator of the Office of Management and Budget’s Office of Federal Procurement Policy. “By conducting market research to develop alternative sources for critical technologies to combat terrorism, the federal government will foster healthy competition among qualified sources,” Styles said.

Current procurement policy encourages government agencies to grant 23 percent of their prime contracts to small businesses, AEA said. A smaller percentage of these contracts are supposed to be directed to women- and minority-owned companies. However, according to the Small Business Administration, the government has had difficulty meeting these goals.

The passage of the Homeland Security bill, however, has given smaller companies a more optimistic outlook.

“Government procurement officials have historically overlooked companies such as mine,” said Michele Wong, CEO of Synergex, a software company that specializes in making applications work across various computing platforms. “Some of the most cutting-edge technologies are being developed in smaller firms, but we are frequently lost in the shadow of the big guys,” Wong said. “By expanding the scope of its market research, the government is effectively leveling the playing field and allowing companies to stand on the merits of products rather than marketing budgets.”


The money game in Washington never changes. The rules of acquisition were written long ago, scribbled on the backs of cashed checks from special interest groups and associations and penciled in the margins of the all-too-lax lobbyist registration forms on Capitol Hill.

To get the big bucks a company has to work that system, has to play by its rules. And so the new games begin. Siemens AG, a German-based company that is no stranger to the bare-knuckle procurement battles of Washington has started a political action committee and is recruiting budget experts with a history of civil service to help pitch the company’s service for anti-terror contracts.

“It’s our intent to become a politically sophisticated player here,” said Gregg Ward, head of the Siemens’ Washington lobbying office.

Microsoft, having fought the government to what amounts to a draw in its antitrust struggles, has managed to infiltrate a government system it once despised by placing former employees in high-level federal security jobs. The company has also hired a former Coast Guard commander to head up a new Washington, D.C.-based office of homeland security, and in September it opened the $25 million Innovation and Technology Conference Center in the nation’s capital. That center “will also enable Microsoft to expand and strengthen our relationships with our many technology partners and the federal government,” said Microsoft CEO Steve Ballmer.

The implementing legislation creating the Homeland Security Department also calls for the establishment of private sector advisory councils. These councils are thinly veiled inside tracks to big-ticket contracts.

“It’s no secret that that getting a seat on one of these advisory councils gives you face time with the people that can open the purse strings,” said a defense-company lobbyist that asked not to be named.

Dozens of companies have registered to lobby for domestic security contracts and grants in the past year, joining an already-long roster of businesses seeking military contracts.

Those hoping for homeland-defense money include some security-sector players who are repackaging their products and services for government consumption and turning to lobbyists for help navigating the complex world of procurement. Others have experience winning contracts from the government, but are focusing anew on security.

The hunt for homeland security dollars is codified in another Washington-based ritual: The creation of a special association that caters to and lobbies for, companies sniffing around for federal contracts. True to form, the Homeland Security Industry Association was recently formed for just this purpose.

The Associated Press and Reuters contributed to this report.